December 2006

Electronic Banking

or many consumers, electronic banking means 24-hour access to cash through an automated teller machine (ATM) or Direct Deposit of paychecks into checking or savings accounts. But electronic banking now involves many different types of transactions.

Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic technology as a substitute for checks and other paper transactions. EFTs are initiated through devices like cards or codes that let you, or those you authorize, access your account. Many financial institutions use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose. Some use other forms of debit cards such as those that require, at the most, your signature or a scan. The federal Electronic Fund Transfer Act (EFT Act) covers some electronic consumer transactions. Electronic Fund Transfers EFT offers several services that consumers may find practical:
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deposits, or transfer funds between accounts, you generally insert an ATM card and enter your PIN. Some financial institutions and ATM owners charge a fee, particularly to consumers who dont have accounts with them or on transactions at remote locations. Generally, ATMs must tell you they charge a fee and its amount on or at the terminal screen before you complete the transaction. Check the rules of your institution and ATMs you use to find out when or whether a fee is charged.
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Teller Machines or 24-hour Tellers are electronic terminals that let you bank almost any time. To withdraw cash, make

Deposit lets you authorize specific deposits, such as paychecks and Social Security checks, to your account on a regular basis. You also may pre-authorize direct withdrawals so that recurring bills, such as insurance premiums, mortgages, and utility bills, are paid automatically. Be cautious before you pre-authorize direct withdrawals to pay sellers or companies with whom you are unfamiliar; funds from your bank account could be withdrawn fraudulently. Systems let you call your financial institution with instructions to pay

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Check Conversion converts a paper check into an electronic payment in a store or when a company receives your check in the mail. In a store, when you give QQ Personal Computer Banking lets you handle your check to a cashier, the check is run many banking transactions via your personal through an electronic system that captures computer. For instance, you may use your your banking information and the amount computer to view your account balance, of the check. Youre asked to sign a receipt request transfers between accounts, and pay and you get a copy for your records. When bills electronically. your check has been handed back to you, it should be voided or marked by the merchant QQ Debit Card Purchase Transactions let you so that it cant be used again. The merchant make purchases with a debit card, which also electronically sends informay be your ATM mation from the check card. This could occur at a store or business, Be especially careful in Internet (but not the check itself ) to your bank or other on the Internet or and telephone transactions financial institution, and online, or by phone. that may involve use of your the funds are transferred The process is similar to using a credit card, bank account information, into the merchants account. When you mail-in with some important a check for payment to a rather than a check. exceptions. While the merchant or other comprocess is fast and easy, pany, they may electronia debit card purchase cally send information from your check (but transfers money fairly quickly from not the check itself ) through the system, and your bank account to the companys acthe funds are transferred into their account. count. So its important that you have funds For a mailed check, you should still receive in your account to cover your purchase. This advance notice from a company that expects means you need to keep accurate records of to send your check information through the dates and amounts of your debit card the system electronically. The merchant or purchases and ATM withdrawals in addition other company might include the notice on to any checks you write. Also be sure you your monthly statement or under its terms know the store or business before you proand conditions. The notice also should state vide your debit card information, to avoid if the merchant or company will electronithe possible loss of funds through fraud. cally collect from your account a fee like Your liability for unauthorized use, and your a bounced check fee if you have insufrights for error resolution, may differ with a ficient funds to cover the transaction. debit card.

certain bills or to transfer funds between accounts. You must have an agreement with the institution to make such transfers.

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Be especially careful in Internet and telephone transactions that may involve use of your bank account information, rather than a check. A legitimate merchant that lets you use your bank account information to make a purchase or pay on an account should post information about the process on their website or explain the process over the telephone. The merchant also should ask for your permission to electronically debit your bank account for the item youre purchasing or paying on. However, because Internet and telephone electronic debits dont occur face-to-face, you should be cautious with whom you reveal your bank account information. Dont give this information to sellers with whom you have no prior experience or with whom you have not initiated the call, or to companies that seem reluctant to provide information or discuss the process with you. Not all electronic fund transfers are covered by the EFT Act. For example, some financial institutions and merchants issue cards with cash value stored electronically on the card itself. Examples include prepaid telephone cards, mass transit passes, and some gift cards. These storedvalue cards, as well as transactions using them, may not be covered by the EFT Act. This means you may not be covered for the loss or misuse of the card. Ask your financial institution or merchant about any protections offered for these cards. Disclosures To understand your legal rights and responsibilities regarding your EFTs, read the documents you receive from the financial institution that issued your access device. That is, a card, code or

other means of accessing your account to initiate electronic fund transfers. Although the means varies by institution, it often involves a card and/ or a PIN. No one should know your PIN except you and select employees of the financial institution. You also should read the documents you receive for your bank account, which may contain more information about EFTs. Before you contract for EFT services or make your first electronic transfer, the institution must tell you the following information in a form you can keep.
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summary of your liability for unauthorized transfers. telephone number and address of the person to be notified if you think an unauthorized transfer has been or may be made, a statement of the institutions business days (which is, generally, the days the institution is open to the public for normal business), and the number of days you have to report suspected unauthorized transfers. type of transfers you can make, fees for transfers, and any limits on the frequency and dollar amount of transfers. summary of your right to receive documentation of transfers, to stop payment on a pre-authorized transfer, and the procedures to follow to stop payment. notice describing the procedures you must follow to report an error on a receipt for an EFT or your periodic statement, to request more information about a transfer listed on

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your statement, and how long you have to make your report.
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Youre also entitled to a periodic statement under which the institution for each statement cycle in which an electronic will disclose information to third parties con- transfer is made. The statement must show the cerning your account. amount of any transfer, the date it was credited or debited to your account, the type of transfer QQ A notice that you may be charged a fee by and type of account(s) to or from which funds ATMs where you dont have an account. were transferred, and the address and telephone number for inquiries. In addition to these Youre entitled to a quardisclosures, you will receive Keep and compare your EFT terly statement whether two other types of information for most transacreceipts with your periodic or not electronic transfers were made. tions: terminal receipts and statements the same way you periodic statements. SepaKeep rate rules apply to passcompare your credit card your EFTand compare receipts with book accounts from which receipts with your monthly your periodic statements pre-authorized transfers are the same way you compare drawn. The best source of credit card statement. your credit card receipts information about those with your monthly credit rules is your contract with card statement. This will the financial institution for that account. Youre entitled to a terminal receipt each time you initi- help you make the best use of your rights under federal law to dispute errors and avoid liability ate an electronic transfer, whether you use an ATM or make a point-of-sale electronic transfer. for unauthorized transfers. The receipt must show the amount and date of Errors the transfer, and its type, such as from savings You have 60 days from the date a periodic stateto checking. When you make a point-of-sale ment containing a problem or error was sent to transfer, youll probably get your terminal receipt you to notify your financial institution. The best from the salesperson. way to protect yourself if an error occurs inYou wont get a terminal receipt for regularly cluding erroneous charges or withdrawals from an account, or for a lost or stolen ATM or debit occurring electronic payments that youve preauthorized, like insurance premiums, mortgages, card is to notify the financial institution by
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summary of the institutions liability to you if it fails to make or stop certain transactions.

or utility bills. Instead, these transfers will appear on your periodic statement. If the pre-authorized payments vary, however, you should receive a notice of the amount that will be debited at least 10 days before the debit takes place.

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certified letter, return receipt requested, so you can prove that the institution received your letter. Keep a copy of the letter for your records. If you fail to notify the institution of the error within 60 days, you may have little recourse. Under federal law, the institution has no obligation to conduct an investigation if youve missed the 60-day deadline. Once youve notified the financial institution about an error on your statement, it has 10 business days to investigate. The institution must tell you the results of its investigation within three business days after completing it and must correct an error within one business day after determining that the error has occurred. If the institution needs more time, it usually may take up to 45 days, in most situations, to complete the investigation but only if the money in dispute is returned to your account and youre notified promptly of the credit. At the end of the investigation, if no error has been found, the institution may take the money back if it sends you a written explanation. An error also may occur in connection with a point-of-sale purchase with a debit card. For example, an oil company might give you a debit card that lets you pay for gas purchases directly from your bank account. Or you may have a debit card that can be used for various types of retail purchases. These purchases will appear on your periodic statement from the bank. In case of an error on your account, however, you should contact the card issuer (for example, an oil company or a bank) at the address or phone number provided by the company. Once youve

notified the company about the error, it has 10 business days to investigate and tell you the results. In this situation, it may take up to 90 days to complete an investigation, if the money in dispute is returned to your account and youre notified promptly of the credit. If no error is found at the end of the investigation, the institution may take back the money if it sends you a written explanation. Lost or Stolen ATM or Debit Cards If your credit card is lost or stolen, you cant lose more than $50. If someone uses your ATM or debit card without your permission, you can lose much more. If you report an ATM or debit card missing to the card issuer before its used without your permission, you cant be held responsible for any unauthorized withdrawals. If unauthorized use occurs before you report it, the amount you can be held responsible for depends upon how quickly you report the loss to the card issuer.
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you report the loss within two business days after you realize your card is missing, you wont be responsible for more than $50 for unauthorized use. you fail to report the loss within two business days after you realize the card is missing, but do report its loss within 60 days after your statement is mailed to you, you could lose as much as $500 because of an unauthorized transfer.

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you fail to report an unauthorized transfer within 60 days after your statement is mailed to you, you risk unlimited loss. That means you could lose all the money in your account and the unused portion of your maximum line of credit established for overdrafts.

If you failed to notify the institution within the time periods allowed because of an extenuatThere is one situation, Once you report the loss ing circumstance, such as however, when you can lengthy travel or illness, the stop payment. If youve aror theft of your ATM or issuer must reasonably exranged for regular payments debit card, youre no longer out of your account to tend the notification period. In addition, if state law responsible for additional third parties, such as insuror your contract imposes ance companies, you can unauthorized transfers lower liability limits, those stop payment if you notify lower limits apply instead occurring after that time. your institution at least of the limits in the federal three business days before EFT Act. the scheduled transfer. The notice may be oral or written, but the institution Once you report the loss or theft of your may require a written follow-up within 14 days ATM or debit card, youre no longer responsible of the oral notice. If you fail to provide the writfor additional unauthorized transfers occurten follow-up, the institutions responsibility to ring after that time. Because these unauthorized stop payment ends. transfers may appear on your statements, however, you should carefully review each statement Although federal law provides only limited you receive after youve reported the loss or theft. rights to stop payment, individual financial instiIf the statement shows transfers that you did not tutions may offer more rights or state laws may make or that you need more information about, require them. If this feature is important to you, contact the institution immediately, using the you may want to shop around to be sure youre special procedures provided for reporting errors. getting the best stop-payment terms available.

Limited Stop-Payment Privileges When you use an electronic fund transfer, the EFT Act does not give you the right to stop payment. If your purchase is defective or your order is not delivered, its as if you paid cash. That is, its up to you to resolve the problem with the seller and get your money back.

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Other Rights The EFT Act protects your right of choice in two specific situations regarding use of electronic fund transfers: First, the Act prohibits financial institutions from requiring you to repay a loan by electronic transfer. Second, if youre required to receive your salary or government benefit check by EFT, you have the right to choose your institution. Suggestions If you decide to use EFT, keep these tips in mind:
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your monthly statements promptly and carefully. Contact your bank or other financial institution immediately if you find unauthorized transactions and errors.

Where to File Complaints If you think a financial institution or company has failed to fulfill its responsibilities to you under the EFT Act, speak up. In addition, you may wish to complain to the federal agency listed below that has enforcement jurisdiction over that company. Office of the Comptroller of the Currency: Regulates banks with national in the name or N.A. after the name:
Office of the Ombudsman Customer Assistance Group 1301 McKinney Street, Suite 3450 Houston, TX 77010 800-613-6743 toll-free www.occ.treas.gov

care of your ATM or debit card. Know where it is at all times; if you lose it, report it as soon as possible. a PIN for your ATM or debit card thats different from your address, telephone number, Social Security number, or birthdate. This will make it more difficult for a thief to use your card. and compare your receipts for all types of EFT transactions with your periodic statements. That way, you can find errors or unauthorized transfers and report them. sure you know and trust a merchant or other company before you share any bank account information or pre-authorize debits to your account. Be aware that some merchants or companies may use electronic processing of your check information when you provide a check for payment.

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Board of Governors of the Federal Reserve System: Regulates state-chartered banks that are members of the Federal Reserve System, bank holding companies, and branches of foreign banks:
Federal Reserve Consumer Help PO Box 1200 Minneapolis, MN 55480 888-851-1920 (TTY: 877-766-8533) toll-free ConsumerHelp@FederalReserve.gov

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Federal Deposit Insurance Corporation: Regulates state-chartered banks that are not members of the Federal Reserve System:
Division of Supervision and Consumer Protection 550 17th Street, NW Washington, DC 20429 877-ASK-FDIC (275-3342) toll-free www.fdic.gov

Federal Trade Commission: Regulates non-bank lenders:

Consumer Response Center 600 Pennsylvania Avenue, NW Washington, DC 20580 877-FTC-HELP (382-4357) toll-free www.ftc.gov

National Credit Union Administration: Regulates federally chartered credit unions:

Office of Public and Congressional Affairs 1775 Duke Street Alexandria, VA 22314-3428 703-518-6330 www.ncua.gov

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Office of Thrift Supervision: Regulates federal savings and loan associations and federal savings banks:
Consumer Programs 1700 G Street, NW Washington, DC 20552 800-842-6929 toll-free www.ots.treas.gov

Federal Trade Commission Bureau of Consumer Protection Division of Consumer and Business Education For The Consumer ftc.gov Federal Trade Commission 1-877-ftc-help